ECON 2304 Lecture Notes - Lecture 11: Overconsumption, Taco, Externality
23 Oct 2016
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The market forces cannot allocate resources efficiently: private market may fail to provide the socially efficient quantity of such goods. Important characteristics of goods: excludable when a person can be prevented from using it. Usually a price is asked to consume goods. Not excludable: radio, national defense: rival in consumption a good where if one person"s use of it, diminishes others" use. When consuming a good prevent others from consuming that same good. Ex: fish tacos (someone else can"t eat the same one) Not rival: digital music file (can be copied indefinitely: most goods are excludable and rival in consumption. Different kinds of goods: private goods excludable, rival in consumption. Ex: food: public goods not excludable, not rival. Ex: national defense: common resources rival but not excludable. Ex: fish in the ocean: club goods excludable but not rival. Example: categorizing roads: uncongested toll road. Excludable only for drivers who pay.
